We hope you are all well and enjoying this sunny weather. Spring feels like it has arrived!

COVID is still very much with us but seems to have less of an impact and life is getting back to normal for most people; instead we seem to have moved onto new concerns. Inflation has been bubbling for a while now, but the situation in Ukraine is appalling, our thoughts go out to the people of Ukraine, and we hope for peace as quickly as possible. This is only worsening the inflationary pressures and the economy is starting to feel this stress.

Chancellor’s Spring Statement

The Chancellor stood up earlier to give his Spring Statement. This is not a budget, which is reserved for the autumn statement. However, with the uncertainties around inflation etc. at present, there were more than the usual number of announcements. Many will say he could have gone further, but the Chancellor kept saying that this statement leaves the public finances (Government Budget) with a margin of safety built in. This clearly, and he referred to it, is because he fears that things could change very quickly and that he needs a safety margin to ensure the public finances can survive.

Onto the announcements, some of which are quite beneficial. As always, the ‘devil is in the detail’, which will follow, and we will update you accordingly when we know more:

• Inflation and Cost of Energy
  • A 5p cut in fuel duty was announced, to take effect at 6pm today. This will stay in place until March 2023
  • The Chancellor announced that energy saving installations e.g., solar panels, will have the VAT rate cut from 5% to 0%. Currently equipment only purchases are subject to 20% VAT, it is unclear what happens to this VAT rate
  • Household Support Fund has been doubled from £0.5bn to £1.0bn. This fund will be passed to Local Authorities to administer and distribute
• Tax Plan – The Chancellor then went on to the budget areas that he sees as priorities over the coming years
  • Families and Cost of Living
    • National Insurance – The threshold (where we start to pay National Insurance) has for several years now been less than the Income Tax threshold. From July this will be raised to equal the income tax threshold i.e., £12,570. This is a major boost. Note: we are unclear what is happening to the employer’s threshold at this point and will advise further when we know more
  • Capital, People, Ideas – This is about encouraging growth in the economy
    • 50% Rates discount for Retail, Leisure, and Hospitality sector was confirmed. This was announced in the autumn budget
    • Employers Allowance has been increased to £5,000 from April. This means that the first £5,000 of employers National Insurance is effectively paid for by the Government
    • He announced a review into the current tax rules around staff training, recognising that we lag our international peers in this area
    • He also recognises that we don’t invest as much in Research & Development as international peers and will look to reform and improve such reliefs
  • Sharing Growth – The Chancellor reiterated his plan to cut taxes by the end of this parliament
    • From 2024 Basic Rate Income Tax will be cut from 20% to 19%
    • He will look make the tax system simpler, fairer, and more efficient

Those were his announcements, and we expected some help with the cost of living, but did he go far enough? It is also worth noting what he didn’t say:

• The 1.25% Health and Social Levy – This will not change and will come into effect next month, effectively adding 1.25% to Employees and Employers National Insurance, as well as increasing dividend tax
• Tourism and Hospitality VAT Rate – This is currently reduced to 12.5% until 31 March. This was not mentioned and therefore will increase and return to 20% from April 1st

Other News

Linked to the Spring Statement is inflation. Inflation to the end of February stood at 6.2% (as announced earlier today). This is significant and is expected to be 7.4% over the remainder of this year. It is not going away short-term. That is increasing the pressure on interest rates and the Bank of England increased the base rate to 0.75% last week. This is still a low rate but expect further rises. If you have a mortgage think about taking out a new fixed rate mortgage to protect yourself from the effects of further rises. Give us a call, we can put you in contact with a mortgage adviser.

The 2021/22 tax year comes to an end on 5 April 2022. 2021/22 pension and ISA allowances will be lost after this point, so if you are thinking about making a one-off contribution get it done before that date. Again, if you need a financial adviser, we can put you in contact with someone.

April also sees a change to Making Tax Digital for VAT. Most VAT registered businesses have already made the transition to filing VAT returns under the Making Tax Digital requirements, namely those with turnovers above £85,000. VAT registered businesses with turnover under the VAT threshold (£85,000) have however not previously been required to make the transition and have been able to continue filing VAT returns on the old system. From April these businesses will also have to comply with Making Tax Digital for VAT. For those clients we currently prepare and file VAT returns for, we will take care of the arrangements and discuss any changes with you as required. However, if you file your own VAT returns, or we undertake a file only service for you, you will need to consider what changes need to be made. If you need assistance making the change or are unsure what you need to do, then please get in touch with your Smarter Accounting contact.

Smarter Recruitment

We are currently recruiting to both offices. We are particularly looking for Accounting Technicians with practice experience. If you know anyone or are interested, then please ask them to contact David in Teignmouth or Mark in Crediton.

Smarter Accounting COVID Policy

The Offices have now returned to normal working, in line with Government policies. The doors are open again and we look forward to seeing you soon! We will of course review things and should changes be required, update you accordingly.

We are proud to sponsor the Charity Ball for Children’s Hospice SW on Friday 3rd June at Exeter Golf & Country Club.  Tickets are £45pp and £400 for a table, please visit Smarter Events for more information, it will be great to see you there!

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Best wishes and stay safe